FAQ
Below are answers to frequently asked questions.
Do people really want payday loan reform?
In a survey conducted by PEW Research Center, 70% of the general public and borrowers said they want more regulation of payday loans including lower interest & fees and affordable payments.
What legislation is the coalition asking for?
We want Kansas to reform its laws to
1) ensure that people have enough time to repay the loan in affordable installments
over months, not weeks
2) limit the payment amount to no more than 5% from each paycheck
Payday loan reform has been attempted in the past in Kansas. How are you going to get reform passed this time?
Several advocacy lobbying groups have worked in the past to get payday loan reform implemented in Kansas. This time our lobbyists have a grassroots coalition behind them that will use the power of people to help our state officials understand the detriment payday loan companies have on our communities when there are no regulations to control their practices. We're confident that when legislators hear the testimony of their constituents they'll realize that this is a serious issue and they need to support reform.
Won't payday loan reform cause the industry to disappear in Kansas? This will hurt the consumers using these loans.
We don’t want to eliminate the industry so post reform, individuals will still have access to the financial services of payday loan companies. The reform we’re looking for aims to set guidelines that are fairer while still maintaining access to credit. We believe these companies meet a need. Payday loan reform has been proven to work in other states. This reform ensures people can access loans without getting trapped. And these terms still allow RESPONSIBLE lenders
to make plenty of profit.
Isn't the real issue the lack of financial literacy being taught? Also, can't we pass laws to increase disclosure and transparency from the lenders? This way borrowers truly understand what
they’re getting into.
Financial literacy is important as are disclosure and transparency from the lenders. However, educated borrowers often know the terms of the loans they're signing up for but with no other options, they must accept them. Regardless of whether they know, and understand, the terms or not, borrowers should still be protected from predatory practices such as being charged 391% APR.
Shouldn't we be looking at the fundamental drivers and causes of poverty in Kansas? If substantial numbers of state residents need these financial products then we need to determine the root cause.
Steps should be taken to determine and address the fundamental drivers and causes of poverty, but this doesn’t negate the fact that the payday loan product is predatory. If the option is available for individuals to use payday loans when they have no other choice, without reform, they will be preyed upon by the industry. It doesn’t make sense to continue to let people suffer at the hands of payday loan companies when we can do something about it right now.
Are senior citizens and people on fixed incomes affected by payday loan companies?
Yes, in most cases, borrowers who receive Social Security payments will qualify for a payday loan. Social Security, as per the lender's criteria of qualifying for a payday loan, is a reliable source of monthly income.
Citations:
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“Payday Lending Abuses and Predatory Practices” Center for Responsible Lending.
http://www.responsiblelending.org/state-of-lending/reports/10-Payday-Loans.pdf
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“Payday and Car Title Lenders Drain $8 Billion in Fees Every Year” Center for Responsible Lending.
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“Payday Loan Customers Want More Protections, Access to Lower-Cost Credit From Banks” PEW Research Center.